Saturday, March 31, 2018

As an entrepreneur mentor and startup investor, I see with sadness the 50 to 90 percent that fail. If you ask them for a reason, most will insist that they couldn’t get funding, or they ran out of money too early. But I’m not convinced that it’s as simple as that. Many are just not facing the reality that their passion had a critical business flaw.

As I was contemplating a classic book “Dead Companies Walking,” by Scott Fearon, who runs a hedge fund that profits from businesses headed toward bankruptcy, I realized that his insights on the common ways that mature companies often doom themselves apply equally well to startups. Every business, young or old, needs to avoid the following six mistakes that he outlines:

Anticipating success based on the recent past. This fallacy, often called historical myopia, essentially involves extrapolating only from recent positive events, and ignoring the reality that markets saturate or evaporate. With the success of Facebook and Twitter, I still see new social media startups almost every day, with most destined to fail.

Relying on an old formula for success. The fallacy of formulas that “can’t fail,” and holding on to troubled ventures, is alive and well in startups. It’s tempting to believe that one more new platform will win for crowd funding or video games, like Indiegogo and Wii. Actually, great new customer solutions lead to great platforms, not the other way around.

Extrapolating you as the target customer. Never mix up what you like with what your customers will buy. Just because you would have loved to have your groceries picked out and delivered, doesn’t mean the mainstream customer was ready for Webvan in 1999. Or ask PlanetRx, an online service for prescriptions, before the Internet was pervasive.

Falling victim to a magical mania or bubble. Perhaps the most famous bubble for startups was the dot.com craze that crashed 15 years ago, where the highest valuations were given to companies with massive user growth, but minimal revenue or profit. This one may be back, and due for another crash. See point #1 or watch history repeat.

Failing to adapt to tectonic shifts in the market. Blockbuster failed to recognize that their industry had fundamentally and permanently changed, and even NetFlix has struggles with the same issue, as video streaming takes over. Things happen fast these days, so don’t get caught re-arranging deck chairs on the Titanic. Fail fast and pivot.

Physically or emotionally moving yourself above the business. More than one smart entrepreneur has been caught in the lofty lifestyle of big money investors, viral growth, and movie star status. Startups can go down many times faster than they go up. Just ask MySpace, eToys, and Pets.com. Never take your eye off the ball in business.

Of course, there are many other common reasons for startup failure, including inexperienced teams, inadequate marketing, no intellectual property, business model doesn’t work, or just giving up too early. Every startup is a step into the unknown, making it a higher risk of failure, so there is no room for complacency or assumption.

In reality, failure is not a bad thing. In a healthy economy, capital markets and discriminating customers fuel growth and new ventures by handsomely rewarding well-executed ideas, and ruthlessly starving out even long-running ventures that refuse to adapt and innovate. A smart entrepreneur learns to embrace failure as a badge of learning that provides a competitive edge.

The lesson here is that even the most promising startups and experienced teams can be misled by sticking with business models that worked in the past, and market opportunities that may no longer exist. While there should be no stigma for failure, there is no joy in being a dead business walking. The quicker you heed these messages, the sooner you will be able to enjoy and celebrate the entrepreneur lifestyle.

Friday, March 30, 2018

If you define your self-worth as an entrepreneur by how busy you are, it’s time to find another lifestyle. We all know people who are extraordinarily busy, but never seem to accomplish anything. For survival, entrepreneurs need to be all about accomplishing results that matter for themselves, their team, and their customers. That’s productivity.

Why is this so hard? In an eye-opening Franklin Covey study, respondents indicated that 40 percent of their time was being spent on things that were not important to them or their companies. That is a huge hit on productivity. For insight, I recommend the details provided in a classic book “The 5 Choices: The Path to Extraordinary Productivity,” by Kory Kogon, Adam Merrill, and Leena Rinne.

Although the authors focus has been on large organizations, I believe concepts are even more relevant to entrepreneurs and startups. Every entrepreneur should consciously follow these five key actions and implementation tips, to compete and survive, as well as to get the personal satisfaction they expect from the lifestyle:

Act on the important, don’t react to the urgent. Filter the vitally important business priorities from the urgent for the moment, but less important ones, and keep your focus on what matters most to your success as a startup. This will increase your return on the moment (ROM) in the midst of fierce distractions.

Go for extraordinary, don’t settle for ordinary. To change the world, as envisioned by your passion, you need to achieve extraordinary results on the important things. That means identifying the few most important roles you play in the startup right now, giving a framework for balance, motivation, and fulfillment.

Schedule the big rocks, don’t sort gravel. You can never achieve major milestones by just sorting through the gravel faster. Decide what is most important and get those activities in the bucket before the week begins. Spend at least thirty minutes each week planning your schedule to execute with excellence on those important things.

Rule your technology, don’t let it rule you. Turn technology into a productivity engine, rather than a burden, to battle the avalanche of email, texts, and social-media alerts that threaten your productivity. Put order into the chaos by using technology to place all incoming information into four categories: appointments, tasks, contacts, and documents.

Fuel your fire, don’t burn out. There are only two sources of energy: a clear and motivating purpose, and a healthy body. Manage the five primary energy drivers of moving, eating, sleeping, relaxing, and connecting to create a pattern of life that fuels your fire and keeps you from burning out before your startup achieves success.

In addition to following these choices personally, and entrepreneur has to instill the same priorities and values into every member of the team, through leadership. Every business culture is built by the actions of its leaders, primarily through the startup process. Here are some ideas on how you can exercise leadership in creating a high productivity culture throughout the team:

Regularly share your commitment to productivity with everyone.

Practice productivity planning with your key team members.

Create an environment where it is safe for people to make better decisions about where they are spending their time, attention, and energy.

Break the assumption that everything you ask for is needed immediately.

Provide and encourage the best use of technology to manage information overload.

Reward highly productive efforts, just as you might reward good emergency responses.

Encourage an aura of healthy energy and living versus anything for the cause.

Whether you are the entrepreneur leader or a team member, remember Pareto’s Law, which asserts that 80 percent of all outputs result from 20 percent of the inputs. It’s not the hours you work, but the work you put into those hours. Think seriously about which 20 percent of your tasks will produce more results than the other 80 percent combined. That’s extraordinary productivity.

Wednesday, March 28, 2018

Many passionate entrepreneurs fight to add more features into their new products and services, assuming that more function will make the solution more appealing to more customers. In reality, more features will more likely make the product confusing and less usable to all. Focus is the art of limiting your scope to the key function that really matters for the majority of customers.

YouTube did it with videos, Instagram did it with photos, and Amazon did it with books. Many of the business plans I have seen as an investor, like trying to integrate all the social media features of Facebook, Twitter, and LinkedIn into a new platform, don’t do it. Of course, once you have a brand and more resources, it can pay to expand your book selling to a full e-commerce site.

In fact, there are a host of reasons why a non-focused startup business is more likely to struggle for survival, lose market and investor attention, and miss out on the opportunity to capitalize on their scope:

Time to market is tied to the size of your offering. In many business domains today, the market seems to change about every ninety days. With the current low cost of entry, nimble competitors appear quickly and seize the high ground of your existing customers and potential. No startup can implement a broad strategy quickly enough to stay ahead.

Broad product offerings require too much infrastructure. More money is hard to find, and building efficient multiple processes is even harder. Every aspect of every product requires development, testing, manufacturing, marketing, and distribution. The probability of failure goes up exponentially as the number of product features increase.

It’s tough for an elephant to be agile. Every successful startup I know has pivoted a couple of times, as they learn what really works in the marketplace and in the sales process. Did you know that both YouTube and Facebook started out to be dating sites? Even IBM, with their personal computer, had trouble making their elephant dance.

Ongoing market leadership requires continuous innovation. The initial larger cost in time and dollars is only the beginning. The first-to-market advantage doesn’t last long. You need continuous innovation in all elements of your product line to stay ahead, or your startup will be quickly left in the dust.

Marketing a product with too many features is self-defeating. It’s almost impossible to craft a memorable message that has more than three bullets. The more you try to capitalize on the breadth and depth of your solution, the more people don’t get the message at all, and settle for a competitor that focuses on their personal hot-button.

Your personal bandwidth is quickly exceeded. When your solution has too many elements, even you can’t keep the priorities straight, and your team gets frustrated, tired, loses motivation, and tends to not do anything well. As a new entrepreneur in a new startup, it’s better to walk before you try to run.

At the same time, focusing on the wrong things is equally destructive and unproductive. In some environments product focus is not the most important element. Perhaps the focus should be on a single distribution channel, better customer service, or a simplified pricing structure. In all cases, hiring the best people is likely more important than adding a few features to your solution.

Thus the first and top focus for every entrepreneur should be on strategy. The strategy needs to be simple, written down, and communicated regularly to the entire team. A simple test is to see if you can quickly name your top three priorities, and if every team member is able to respond quickly with the same three. Too many strategy elements generate lots of work, but few results.

The final focus should be on emphasizing strengths and measuring success, rather than on solving the crisis of the moment and eliminating weaknesses. Only by focusing on the right elements of market, product, business, and people, can you really hope to win. Bigger is not necessarily better. Be the best in your chosen niche and you can change the world.

Monday, March 26, 2018

Nothing happens in business until someone makes a decision. These days, with the market moving at warp speeds, the timeliness of decision making is also critical. What might have been the right decision yesterday, may be the wrong decision tomorrow. Yet one of the most common complaints I hear as an advisor to businesses is that the decision process is arbitrary or broken.

The challenge is that everyone, including the experts, seem to have a different view of the right decision process, and when it should be used. To put this into perspective, I found a good summary of the different levels of delegation and enablement in a recent book, “Effective People Management,” by Pat Wellington, who is an experienced international executive and consultant.

She suggests that the level of decision delegation should be commensurate with the experience and knowledge level of both the manager and the team involved in working the issue. If the team is very experienced, the manager should delegate more and move up higher on the following numerical scale for optimum decision effectiveness and speed:

Manager decides and announces the decision (tells). The manager at this level reviews options in terms of objectives, priorities, timescale, and then autocratically decides on an action and informs the team of the decision. This approach will likely de-motivate experienced teams, but may be required when time is of the essence.

Manager decides and then communicates to others (sells). At this level, the manager makes the decision, but then explains the reasons and the positive benefits accruing to the team, the company, and customers. The decision then becomes part of the team learning process, and confidence in the manager increases rather than decreases.

Manager presents the decision and invites comments. The manager presents the decision along with the background. Team members are invited to ask questions and discuss the rationale. This more participative and engaging approach enables the team to appreciate the issues and implications of all options. This approach improves satisfaction.

Manager “suggests” a decision and invites discussion. The manager discusses and reviews a provisional decision on the basis that the manager will evaluate their views before making the final decision. Thus, team members have some real influence over the final decision, and recognize a real contribution and appreciation of the team.

Manager presents the situation for input and joint decision. With this approach, the manager presents the options to the team. Team members are encouraged and expected to offer ideas and additional options, and discuss implications of various options. Being high-involvement and high-influence is highly motivating to every team.

Manager explains the situation and asks the team to decide. At this level, the manager will effectively delegate responsibility for the decision to the team, perhaps with stated limits. The manager may or may not choose to be a part of the team that decides. This approach requires a mature team, and major responsibility acceptance by the team.

Manager asks the team to define the problem and also decide. With this approach, team members identify and analyze the situation, develop resolution options, and then decide on a preferred course of action. The manager agrees to support the decision and manage implementation. This puts the team at the strategic decision-making level.

In my experience, successful first-time entrepreneurs and startups operate nearer the top of this list, while larger and more mature organizations that run effectively operate nearer the bottom of the list of approaches. If I see the opposite, I often find a dysfunctional business, or at least one which may not be agile enough to compete in today’s marketplace.

What this means to you is that you must pick your role and your company, based on your own motivations and expectations. It also means that you must be prepared to change and adapt as the organization evolves. Are you at the right place in the right organization to be effective, satisfied, and motivated to make the decisions that need to be made?

Sunday, March 25, 2018

The world of marketing is changing faster than technology these days. Winning entrepreneurs have long since supplemented conventional print and video “push” marketing with digital online interactive “pull” marketing, and more recently added social-local-mobile (SoLoMo) to the mix. Mobile and global are driving all of these in innovative new ways to grow your business.

For all those entrepreneurs and startups who can’t yet afford a new age marketing agency, it’s impossible to keep up with “best of breed” marketing activities and strategies. I found some help in catching up via a classic book “Sell Local, Think Global,” by marketing message expert Olga Mizrahi. Along with her insights, she offers 50 innovative new tips to grow your business.

I’ve paraphrased here a subset of her guidance which I believe characterizes the key changes and the implications for entrepreneurs just starting, as well as more mature businesses:

Pinpoint your Unique Value Proposition (UVP). These days it is often more about being unique than being valuable. A UVP sells a product or service because it differentiates it from other products or services that are available. Skip the better, faster, or stronger; you need to be the best, fastest, or strongest to truly stand out.

Reach your target audience intimately through interaction. Target marketing has moved to a whole new level both geographically and demographically. With social media, you can interact more precisely and create custom products and marketing to be almost all things to all people. The broad-brush push-marketing is no longer competitive.

Build word-of-mouth into your product or service. The very best marketing is word-of-mouth from your very happy customers. You need to give them something to talk about and incentives to be brand ambassadors. These include an aura of exclusivity and cultivating an “under-the-radar” vibe that pushes people into one-up-style revelations.

Proactively seek out win-win alliances. Voluntary open-ended alliances are more important than ever, and easier than ever. Consider collaborating via shared marketing efforts, trade-show both space, co-branding promotional products, referral agreements, and cross-linking web sites. With informality, these must be win-win relationships.

Modernize the user website experience. The standards for user-friendly continue to move up. Make sure your users don’t have to think, and participating in your call to action is intuitive and organic. Modern web layouts flow smoothly and quickly for an easier to read, satisfying experience. How many website visits have you aborted in frustration?

Incorporate live chat into every online service. No one wants to call an 800 help line anymore. Online shoppers like online chat, because it makes the experience more like in-store shopping. The same applies to other aspects of consumer experience: customer questions answered, problems fixed, and aggravations soothed, to close more sales.

Understand the power of online reviews to your advantage. Stop fearing bad reviews, and see any review as an opportunity and an asset. Respond to reviews to give a personable picture of you, your company, and your products. People want to go with tried-and-true choices, and many positive reviews will offset that occasional negative one.

Optimize how you website looks on mobile devices. Mobile will soon be the number one way people do web browsing, as it already is for e-mail. Yet nearly half of all small businesses still lack any website, much less a mobile-friendly one. Modern websites adapt to the mobile environment, or you can provide a separate mobile site at low cost.

See the world through the eyes of Generation Z. The newest generation has never lived life unplugged, and their blend of innocence, simplicity, and pure excitement appeals to every customer. Optimize for them, and you will be a winner today, as well as in the future. It starts with a willingness to engage, listen, and learn without fear.

Embrace giving back to the world community. Bring new awareness to your business by promoting a higher goal, which will garner additional respect and new business from your supporters. The first steps are effective communication to your clients, employee participation, and partnering with other organizations that have similar initiatives.

If you are not happy with how fast your business is growing, pick one of these areas to focus on first, then a second and third. Don’t try to do everything at once, and don’t expect that you can do it once and forget about it. Your business is a living entity, just like you are. Treat it with ongoing respect and attention, or the growth you expect and deserve will fade as the world changes.

Saturday, March 24, 2018

Whether you are an entrepreneur managing a startup, or a corporate executive with thousands of employees, it’s hard to ignore the evidence of big value from happy employees. According to a recent study from Deloitte, happy employees have been shown to be up to 20 percent more effective in the workplace than unhappy employees, as well as far more loyal and productive.

The challenge is to find the best way to keep everyone on your team happy and productive. Salesforce, which was ranked by Fortune magazine as the world’s best place to work in 2018, keeps the focus on employee happiness through dedicated “mindfulness” rooms, 56 hours of paid volunteer work a year, to $5.5 million in bounties paid out last year for great new hire referrals.

Unfortunately, I suspect that there is no simple formula that will work for all companies. Most experts agree that workplace happiness is hard to find, partially because we as humans are not particularly good at staying happy. Psychologist Ron Friedman, in his classic book “The Best Place To Work,” explores this problem, and I like the summary he offers to maximize your efforts:

Reward frequency is more important than size. Business feedback indicates that smaller frequent positive feedback and rewards will keep people happy longer than a single large infrequent happy event. Even the biggest awards or raises “wear out” in less than a year, with most employees responding better to small doses every few days.

Positive event variety prevents adaptation. People tend to discount events that happen repeatedly, no matter how positive. The value of going away on vacation is that it breaks the routine of everyday life, as well as making you recognize the pleasures of being back home. At work, variety could mean unique events or awards each month.

New life experiences have more impact than reward objects. Evidence indicates that providing new positive life experiences (for example, a hot-air balloon ride, wine-tasting class, or vacation to Italy) tends to provide a greater happiness boost than spending a comparable amount on material objects (flat-screen television, fancy suit, or purse).

Happiness can be triggered outside of conscious awareness. Relaxing music can lift employee moods unconsciously, as can pleasing scents (nearby bakery, candles, or coffee). Stores and casinos use “aroma marketing” to put customers in positive moods, not for productivity, but to increase their optimism and willingness to spend. In the office, consider investing in quality office coffee machines, which will not only reward employees with free, quality coffee options but will create regular aromas of coffee.

Focus on achievements leads to better job appreciation. Businesses need to spend more effort asking and listening to employee achievements, rather than a continuous focus on what’s broken or not done. Asking about achievements in a group setting encourages recognition of co-workers and gratitude expression, which catches on.

Research also shows that when team members are happy at work, they are better collaborators, work to common goals, and are more innovative. That means it pays to elevate people’s mood at the start of a team effort by using refreshments, good news, or an interactive activity. The trick is to promote a mindset that benefits the activities that you are asking them to undertake.

Managers and executives should never confuse recognition events and group lunches with unproductive time. All interactions that bring employees together in a positive way extend productivity in the long run. In a similar vein, don’t confuse people presence with productivity. Productive employees are the ones who are passionate, focused, and excited to be there.

Believe it or not, it is possible for employees in business, as well as entrepreneurs, to be both happy and productive. As a business, happy employees lead to success, more than success leads to happiness. If you want to emulate Salesforce’s success as a great place to work, and as a successful company, maybe it’s time to think more like they do about employee happiness.

Friday, March 23, 2018

No company or entrepreneur gets it right every time. As an angel investor, I have found that people claiming a perfect record are either lying to themselves, or they are not taking enough risk to enable a big payback. In the long run, your ability to thrive in business today is more about how you prepare for and handle the inevitable exceptions and failures, than shooting for perfection.

In trying to put a practical edge on this message, I found some help in a new book, “The One-Percent Edge,” by Susan Solovic. She has been there, as a serial entrepreneur, internet pioneer, attorney, and media personality. She offers some good lessons for every modern business and entrepreneur that I can paraphrase here, with insights from my own experience:

Not every customer is predictable, so expect exceptions. Of course, it’s important to put standard processes in place for all transactions, returns, and service requests, but a policy of “no exceptions” is not competitive today. A special case handled individually can be your best advertising, through social media and this world of instant communication.

For example, when a grieving customer informed a T-mobile customer representative that her husband had just passed away with a $2000 overdue bill, with all funds frozen, the customer’s account balance was forgiven. She was even offered unlimited minutes for the following two months. She shared her joy online, with over 29K views and likes.

Train customer support personnel for complex situations. By the time a customer decides to reach beyond a front-line employee, the situation is already complex. The age-old approach of putting marginal or new employees in support is a recipe for disaster. Put your best employees in support, and continually enhance customer support satisfaction.

Give employees the authority and incentives they need. Above all, employees must have your trust and empowerment to make exceptions where appropriate, and solve problems on the spot. One of the best approaches I have seen is managers providing rewards for problem solving, including visible public recognition for their peers to see.

For example, the transport staff at the Staten Island University Hospital Radiology Lab has the tough and tiring job of wheeling patients around for testing. When an employee witnessed another solving a problem or going the extra mile, they would nominate them for a Go the Extra Mile (GEM) certificate. These make everyone more empowered.

Respond to customer special requests in real time. For better or for worse, the Internet and social-media-based customer access have made consumers expect virtually immediate responses to their issues. I still regularly hear from customers that wait for days or weeks after submitting a web form, or get stuck in telephone queues for an hour.

Offer a great customer experience, not just a product. Today lasting customer loyalty requires an experience that goes far beyond the initial product or service. This includes marketing, social media, the buying experience, as well as service. If that experience falls short of the mark, your business will suffer, no matter how great your service is.

Many negative customer experiences can actually be turned into positives, if you quickly acknowledge the problem, resolve it, and spread the positive message before the negative one gets amplified. Don’t repeat the “United Breaks Guitars” experience, which now has been published as a book on what not to do.

Be accountable, and admit and correct mistakes quickly. Successful leaders and businesses are humble and transparent enough with themselves and others to admit mistakes and correct them quickly. In this way, those around them, including customers, can benefit from their learning, and feel a positive relationship and trust.

Learn from the companies that get it right. Etsy is an example of a company that has a tremendous reputation with customers. Every user gets a unique experience, and this gives them a feeling of being special and well-cared for. The team works hard to personalize the customer journey so that users feel more connected with the experience.

Remember, you don’t have to be perfect to outperform the competition. Only one percent above the rest is still the top. No quantum leap is required to get there – just make small incremental improvements in all areas of your business, and you too can avoid the pain of a radical overhaul (when it may be too late anyway), while increasing your agility and resilience.

Wednesday, March 21, 2018

Most entrepreneurs are so convinced that they are the disruptive element, they fail to anticipate that unknown facts or events can and will occur to disrupt their own well-laid plans. While it’s true that there is no way of know specifically what might happen, you need to anticipate the worst, and actually build a Plan B. People who haven’t thought about a Plan B often don’t survive the shock.

In my years of mentoring and working with startups, I’ve seen and read about some amazing disruptions, as well as recoveries, and I’m sure each of you could add your own. For example, you probably didn’t realize that both Facebook and YouTube started out intending to be dating sites, but implemented a Plan B when they found dating had become an over-saturated market.

While thinking about the most common surprises that I have seen with startups, and contemplating how to best prepare for them, I found some good guidance in a classic book, “Think Agile,” by successful entrepreneur and startup advisor Taffy Williams. I will key off his list of situations requiring dramatic plan changes, as well as the best ways to plan for these changes:

Indispensable people jump ship at the worst possible time. The surprise departure of a key staff member is inevitable, no matter how strong the financial and passion incentive. Every entrepreneur needs a succession plan early on the top three people, with a reshuffle and replacement strategy. Get to know your headhunter or freelancer.

Your rollout timetable suffers a big setback. You can’t predict big quality problems, funding shortfalls, and viral events that don’t work. You can and should create realistic time ranges around deadlines, and work up “what if” scenarios around your milestones. Don’t succumb to blind optimism, or pressure from investors to go for broke.

A new market opportunity emerges which you can’t ignore. It’s not just undesirable circumstances that require big plan changes. Natural disasters or economic conditions can create new markets, or an offer to partner or merge may materialize suddenly. The agile way to respond is to research for flaws in the opportunity, and test the waters first.

Your biggest or only customer dumps you. This can happen through no fault of your own, or rapid market erosion you didn’t foresee. Your Plan B should always include a diversification plan you can implement quickly, as well as an emergency “right-sizing” plan to weather the gap to some new customers or services.

Another disruptive technology trumps yours. What seemed like a winning technology, like RIM with its Blackberry, can quickly be superseded by a new entrant, such as the iPhone from Apple. Every startup needs to build and monitor their list of top competitive risks, and size the cost of a quick direction shift if the worst case happens.

Each of these initiatives has to be led by an entrepreneur who is willing to manage with an open mind, not only during the formative stages of the business, but also during the growth stages. Most entrepreneurs start losing their agility with that first taste of success. The best ones are often viewed as paranoid, since they proactively look for problems well after the first success.

One of the best ways to increase agility is to focus on specific problems and drive them to resolution, rather than instinctively flailing through several problems at the same time at a high level, hoping that one of your many actions will stick. Scientists have shown that the best creative problem-solving consists of these five-steps:

Learn as much as possible personally about the problem.

Engage a qualified and diverse team, staff, and advisors.

Document the ultimate goal, so people can work backward as well as forward.

Ramp up communication to bring in outliers and spark fresh thinking.

Step back for a while to let the creative juices flow before making a decision.

These are turbulent times, as well as time for great opportunities, for the entrepreneurs that are agile, innovative, and open to change. Don’t get stuck in the past, or let some early success lead you to competitive lethargy or crippling indecisiveness. Those are the diseases of too many big business executives. You didn’t decide to be an entrepreneur to be like them.

Monday, March 19, 2018

Based on my many years as an executive in large and small businesses, and time mentoring aspiring entrepreneurs and business owners, I find that most people enjoy being CEO critics for a day, but are hesitant to consider themselves as a long-term candidate for that position. They often rationalize their lack of zeal to not having the right background or credentials for the role.

I’ve long felt that CEOs are just regular people, like the rest of us, perhaps with a bit more drive and confidence. I found this view well supported in a new book, “The CEO Next Door,” by Elena Botelho and Kim Powell. Unlike my gut feelings, they base their views on their own study of over 2,600 business leaders, first surfaced last year in The Harvard Business Review.

Their conclusion is that those who reach the top in business share behaviors that anyone can master, including being decisive, reliable, delivering on what they promise, adapting boldly, and engaging with stakeholders without shying away from conflict. These authors go on to debunk the many myths I hear that hold back many aspiring CEOs, including the following:

Prior executive experience trumps all for CEO success. Among the more shocking findings in the research was that first-time CEOs were statistically no less likely to meet or exceed expectations than those with prior CEO experience. If you have the drive and passion, don’t let the experience myth keep you from aspiring to your dream.

CEO is a birthright talent, rather than an acquired skill. I’m sure that some natural- born CEOs do exist, but I agree with Peter Drucker, who said “Leadership is not magic, and has nothing to do with genes. It’s a discipline, and it can be learned.” Over 70 percent of the CEOs in the study claimed no early age aptitude or interest for such a role.

To become a CEO you must have a flawless track record. The reality is that 45 percent of CEOs interviewed had at least one mistake that ended a job or was extremely costly to the business. What set successful CEOs apart was not their lack of mistakes, but how they handled setbacks. They talked about what they learned, rather than failure.

Successful CEOs need a larger-than-life personality. Charismatic “masters of the universe” may dominate Hollywood films, but in real boardrooms, results speak louder than charisma. Over a third of the CEOs in the study actually described themselves as introverted, with no measurable differences in results between introverts and extroverts.

Great CEOs work harder than the rest of us. Analysis showed no predictive relationship between how hard a leader worked and how likely he or she was to become a CEO. Furthermore, 97 percent of low-performing CEOs in the study scored high on work ethic. Many people work hard, but fewer consistently produce winning results.

For CEOs, the smarter, the better. Above-average intelligence is an important indicator of CEO potential. However, once at that level, higher intelligence as measured by standardized tests does not increase the odds of performing well in that role. It’s key to speak in clear simple language to convey messages and get the rest of us to follow.

Great CEOs must be able to excel in any situation. A common misperception is that a great CEO is capable of handling any situation. I find that the best are very thoughtful about identifying the roles and context where they can contribute. They have the self-discipline to turn down the wrong job or a challenge they are not yet ready to tackle.

The right academic credentials are critical to be a CEO. Some of the most famous billionaire CEOs, including Bill Gates and Mark Zuckerberg, dropped out of school to build their businesses. In this study, only eight percent of the CEOs did not complete college, but I’m not convinced that the degree is as critical as the discipline and learning.

Great CEOs are likely to be egotistical superheroes. In fact, the authors found that the weakest CEO candidates were more likely to be self-centered, and were superheroes only in their own mind. The best were quick to use the term “we,” and recognized the strengths of their team. Many traced their team focus back to mentoring or athletics.

My message is that you need not let any of these myths derail you from running your own company, or limit your career advancement in your chosen profession. I’ve known many great CEOs, and like Peter Drucker, I don’t believe there is any magic formula. With the pace of change in business today, there has never been a better time to follow your dream, and get to the top.

Sunday, March 18, 2018

As an entrepreneur, you should treat gossip among the members of your team as a reduction in productivity at best, and at worst, an indication of unhappy, un-empowered, or non-collaborative employees. As a leader, you should be asking yourself if you are the problem, and working hard to improve the situation before it gets out of hand, causing lost clients as well as lost productivity.

Occasionally I see articles, like this one from Monster.com, that claim gossip in the workplace can be beneficial in getting unspoken information out in the open for leaders to see, or it allows people to release pent-up negative energy before it explodes. Good gossip, as opposed to the malicious kind, some argue, might promote camaraderie and accountability on the team.

I personally think that good gossip is an oxymoron, since most dictionary definitions agree that the essence of gossip is sharing personal details about others that are not confirmed as being true. In any case, it behooves every entrepreneur and business leader to keep their antennas up for an increase in gossip, and know how to address the problem without causing more.

I recently saw some good insights on this challenge in the classic book “The 15 Commitments of Conscious Leadership,” by Jim Dethmer, Diana Chapman, and Kaley Warner Klemp. They concur with me that gossiping is a key indicator of an unhealthy organizational culture, and one of the fastest ways to derail creativity. They summarized the following key motivators for gossiping:

Make others appear wrong. Many team members relate to others on the team from a one-up or one-down position: They see each person’s position as either less than or more than their own. Gossip is a way to engage in one-upmanship, relieving them from feeling inferior. It allows people to twist reality to make others wrong so they can be right.

Gain validation for a personal view. People’s egos live in a world where they are either right or wrong. Since they don’t want to be wrong, gossip allows them the opportunity to validate their righteous perspective. Gossip provides the vehicle to bounce off our thoughts with friends and associates to gain validation and support.

Control others not under their authority. By gossiping, team members feed their judgments to others, manipulating the information flow and attempting to control the beliefs and behaviors of others. This is often driven by fear of their real persuasive ability, or lack of confidence in the organizational hierarchy or decision making process.

Get more individual attention. Absent something meaningful to share with others, team members may choose to reveal a critical or private story about someone else to keep some attention on themselves. Unfortunately, spreading gossip or rumors is like buying attention; it’s temporary and has little foundation.

Divert attention from possible weakness. When someone feels vulnerable, gossip is a great way to shift potential negative attention to someone else. For example, team members may gossip about the personal lives of their boss or business leaders to highlight faults, making their own faults less significant.

Avoid face-to-face negotiation and conflict. A popular reason for gossiping in teams is a concern that direct opinions or preferences are going to upset someone. Thus they vent to people not directly related to the issue, such as friends and other team members, somehow hoping that will get the message across with having to confront anyone.

Gossip doesn’t work without a willing listener, so agreeing to listen is really as contributory as speaking it. Team members who refuse to listen will kill gossiping as effectively as no speakers. The authors agree with me in observing that candor and authentic expression of feelings and facts are more effective in communication and maintaining the health of the organization.

The only way to really clean up gossiping is to reveal both the gossiper and the listener to each other, to the person about whom they have been gossiping, and to clearly delineate the relevant business facts from the stories. People who refuse to change need to be removed from the team before they destroy it.

Every business needs creative energy and collaboration to survive in today’s competitive environment, and these are undermined wherever gossip is present. It only gets worse if you pretend you don’t hear it.

Saturday, March 17, 2018

According to recent surveys, job satisfaction for employees is at an all-time low. Only 13 percent of workers are fully engaged in their job. The sad part is that is seems to be getting worse, rather than better. One obvious alternative is to become an entrepreneur. As a mentor to many aspiring entrepreneurs, I’m often asked what it takes to switch and get real satisfaction from this lifestyle.

I found some great help in outlining the elements of this process in the classic book, “Disruptors,” by Kunal Mehta. It’s a collection of stories from real-life young entrepreneurs, all of whom chose to break away from the comfort and security of unfulfilling corporate careers to be entrepreneurs. It outlines their perspectives, struggles, and heartbreaks, as well as their successes.

In fact, Mehta focuses on a special class of entrepreneurs that he calls disruptors. These are ones behind many of the modern game-changing companies, like Pinterest and Foursquare. He notes that they all seem to exhibit a special extra focus on preparedness, duality (one foot in reality and the other foot out), and a keen self-awareness of what they have and what they want.

Yet I know from experience that being an entrepreneur in any fashion is not for everyone. It takes at the very least a special blend of confidence, passion, determination, leadership, and problem-solving abilities. Given these, Mehta outlines five specific steps to get started and stay ahead of the game, which I agree are essential and have paraphrased here:

Be open to new opportunities and options. Too many people flat-line in their careers and accept being unhappy because they think there are few other options available to them. It’s up to you to constantly look for options inside and outside your own network, and be willing to make the adjustments to capitalize on them. Be prepared to experiment.

Build the courage to “Think Different.” Fear is a dangerous emotion with which to guide your actions. Put it behind you by setting your own realistic metrics for success and happiness. Quit looking for critics to flood disbelief on your vision. If your intentions are genuine and your work ethic is strong, meaningful and lasting success is likely.

Expand your support group and test your limits. Find the men and women you wish to be more like, talk to them, study them, and learn from them. Surround yourself with people who are constantly striving to be better, and support each other. Erase the qualms about failing, and willingly accept failure if it comes, as the ultimate learning opportunity.

Focus your efforts on creating value, not wealth. The glamour of wealth will quickly tarnish if you don’t feel passionate about the work you are doing. Find a role where you can work seven days a week without it feeling like a chore. Learn new skills that will make you an expert in that domain, and both satisfaction and wealth will follow.

Take action now. Overcome complacency and re-test your limits to create impact in a more meaningful way. Set long-term goals, short-term goals, and micro-goals. Then write them down. By writing these goals, you add validity to each target and create a mental desire to see them fulfilled. Then accomplish one, sense the progress, and add another.

Thus it’s clear to me that your journey from corporate America to being an entrepreneur does not begin with just an innovative idea, or an annoying dissatisfaction. It has to start long before that, with a mindset event that drives a real change in behavior. That could be a burning need to fix a wrong, disdain of an existing system, or just the desire to be one’s own boss.

Regardless of the motivation, you should expect that the journey will be longer than you anticipate, and require immense courage. The rewards, as reported by everyone who has been there, will still be well worth it.

I do believe that every aspiring entrepreneur needs to look inward first, to understand their own drivers. So don’t be afraid to take a hard look in the mirror. Old habits die hard, and the longer you wait, the harder it will be to make the jump, and your odds of success go down. It’s a lot more fun to be a disruptor than to wish you were one.

Friday, March 16, 2018

For your business to continue to grow, there are really only two ways to get customers. One way is to take customers away from an existing player, and the other is to create a new market with a new product or service that didn’t exist before. Examples of recent “new market” big wins include Apple with iTunes for digital music, Uber for ride sharing, and Airbnb for renting a spare room.

Business growth by creating new markets is now popularly called the “blue ocean strategy,” based on a classic book with the same name. The alternative is a “red ocean strategy,” where everyone is swimming within the same predefined industry boundaries, and cutthroat competition is turning the ocean a bloody red. A blue ocean means new and uncontested territory.

I just finished a recent update by the Blue Ocean authors, called ”Blue Ocean Shift,” by W. Chan Kim and Renee Mauborgne. It compares the successes and failures of blue ocean business efforts in recent years, and offers some specific guidance on shifting to this strategy. I am impressed by the authors’ five-step systematic approach, paraphrased here, for implementation:

Target the area where you have to most to offer and gain. It all starts with broadening your scope of thinking, assessing your own strengths, and focusing on areas where you bring the greatest advantage. For example, Apple already had the digital and file management expertise, and they recognized an unmet need with music sharing.

Equally important is the effort to put together, isolate, and motivate the best team for the journey ahead. Do you have the mix of skills, with the level of functional and hierarchical authority required? You want to select people who are good listeners, are known to be thoughtful, and are willing to raise questions when others don’t.

Build an objective view of the strategic landscape. When the team sees the strategic reality and agree on the need for change and growth, only then can you create real alignment and a collective will to make the shift. If this is done properly, you won’t have to tell people to move to the new ocean strategy – they will viscerally feel it and do it.

Uncover hidden pain points that limit your industry. This will help everyone identify the unexplored spaces where value is trapped and waiting to be unlocked. Pain points will be seen as blatant opportunities, rather than constraints. Remember that the total customer experience is now much broader than just product features and price.

Identifying all of your non-customers in the current space allows an assessment of the total demand landscape that lies outside the current industry understanding. Airbnb realized there was an opportunity to extend the hospitality industry beyond the capital-intensive world of hotels and resorts, and hotels were a pain point for young travelers.

Reconstruct market boundaries to allow new solutions. This is where you put random brainstorming aside and apply systematic logic to re-create markets and industry boundaries. The result is firsthand insight into practical ways to reframe existing industry problems and create break-through solutions that will excite a new class of customers.

Finalize your move with market tests and business models. The goal of this step is to take the politics out of the commitment process, and obtain validation and feedback on the strategic options. What you want is a clear decision, validated by key stakeholders, with a wealth of insight on how to prevent gaps in execution.

Now is the time to tighten and refine your plan to maximize its market potential, and then formally launch it. This ensures that the move you roll out generates not only a leap in value for buyers, but also quickly accelerates growth in your own business. It’s important to move while the team’s energy is high, and they are fully committed to the shift.

These steps are essentially the same, whether your business is mature, or a startup. I see more and more blue ocean efforts these days, but unfortunately not many have the discipline and rigor outlined here. Perhaps it’s time to take a hard look at your own business growth strategy. It’s a lot more fun to systematically explore new territory, than to endlessly chum the existing sharks.

Wednesday, March 14, 2018

Unfortunately, many entrepreneurs seem to prefer to fail their way to the top, rather than do some research and learn from the successes and mistakes of others. It seems to be part of the “fail fast, fail often” mantra often heard in Silicon Valley. As an advisor to many startups, I’m convinced it’s an expensive and painful approach, but I do see it used all too often.

In general I try to focus on the positives and tell entrepreneurs what works, but sometimes it’s important to reiterate the common things that simply don’t work. I remember a classic book by MJ Gottlieb, “How To Ruin A Business,” that highlights failures. He humbly outlines fifty-five of his own less-than-stellar business anecdotes over a career in business for all to see and avoid.

Here is my selection of the top ten things to avoid from his list that I have seen lead to failure most often. I’m sure each of you could add one or two more from your own experience, and I’m desperately hoping that together we can convince a few aspiring entrepreneurs to avoid at least one practice that lead to losses and suffering:

Spend money you don’t yet have in the bank. In the rush of a startup, it’s tempting to start spending the money you expect any day from a rich uncle or a major new customer. But things do go wrong, and you will be left holding the bag. It’s not only embarrassing, but one of the quickest ways to end your entrepreneurial career.

Open your mouth while in a negative emotional state. Many entrepreneurs have destroyed a strategic alliance, an investor relationship, or lost a key customer by jumping in with harsh words after a bad day at home or at the office. If you don’t have anything nice to say, keep quiet and wait for another day. You may be dead wrong.

Over-promise and under-deliver. Always manage expectations, and always under-promise and over-deliver. As a bleeding-edge startup, you can be assured of product quality problems, missing business processes, and customer support issues. Use the rule of “plan early, quote late, and ship early,” to be a hero rather than a zero.

Create a market you can’t supply and support. If your product is really new and disruptive, make sure you have supply to meet the demand at rollout, and a patent to prevent others from jumping in quickly.Too many entrepreneurs have had their new positions in the marketplace taken away by competitors and others with deep pockets.

Count on someone who offers to work for free. As a rule of thumb, expect to get exactly what you paid for. People who work for free will expect to get paid soon in some way, or they may take it out in trade, to the detriment of your business. Student interns are an exception, since their primary objective should be learning rather than money.

Underestimate the importance of due diligence. No matter how good a supplier or investor story sounds, it is not smart to skip the reference and credit checks. Visits in person are always recommended to check remote office and production facilities before any money is paid up front on a contract.

Grow too quickly for your finances and staffing. Growing quickly, without a plan on how to implement that growth can be a disaster. Learn how to reject a big order if you are not prepared to handle it. It takes a huge investment to build large orders, and large customers are the slowest to pay. In the trade, this is called “death by success.”

Be confused between working hard and working smart. In business (as in life), you should never reward yourself or your team on the quantity of time spent, rather than results achieved. Quality works at a thousand times the pace of quantity.Prioritize your tasks, take advantage of technology, and constantly optimize your processes.

Be afraid to ask for help, advice, or even money. Entrepreneurs often let pride and ego stand in the way of leveling with trusted friends and advisors. The advice you don’t get can’t save your company. I always recommend that a startup create an advisory board of two or three outside experts, who have connections to even more resources.

Rely on a verbal agreement in business. Get every agreement on paper early and always, put a copy in a safe place, and have the agreements updated when people and environments change. People come and go in every role, and there is no such thing as institutional memory. People only remember the agreements which benefit them.

If all these failures seem intuitively obvious to you, why do I see them repeated over and over again by new entrepreneurs? Perhaps it is because entrepreneurs tend to let their egos cloud their judgment, they don’t like to be told what to do, or because there is no single blueprint for business success.

The good news is that, I continue to see articles with evidence that entrepreneurs are happier and healthier than their employees, or even most other professions, regardless of how much money they make. even with the pitfalls outlined here. I suspect that most of these have failed their way to this top satisfaction.

Monday, March 12, 2018

In today’s fast moving world of business startups, learning trumps knowing every time. What established businesses know through experience keeps them from looking for the new and innovative ways to do what they do better, cheaper, and faster. I’m convinced that’s why most mature companies are slowing down or buying their innovation through acquisition, rather than building it.

In her classic book, “Rookie Smarts,” Liz Wiseman, one of the top thought leaders in business, amplifies this point as it relates to hiring and cultivating the curious, flexible, youthful mindset in keeping a mature company young and competitive, as well as keeping experienced employees more productive.

She outlines four distinct ways that business people doing something for the first time, whether they be entrepreneurs, or people in a new role in a larger company, tend to think differently than experienced veterans. With my focus on startups, I can translate very easily how her points lead to more innovation even in the entrepreneurial environment:

Maintain an unencumbered mind. True entrepreneurs, like backpackers, are ready to explore new terrain, more open to new possibilities, and don’t get stuck in yesterday’s practices. They tend to ask the fundamental questions, see new patterns, and notice the mistakes of others. They are not afraid to act boldly, and tend to recover quickly.

Seek out experts and return with ideas and resources. Startup founders need to be more like hunter-gatherers, seeking out experts and trying new ideas to address their challenges. They are not entrenched in their domain, and don’t look for data that confirms what they already know. They don’t hesitate to disseminate the knowledge to their team.

Take small calculated steps, moving fast and seeking feedback. Experienced business professionals tend to take big steps, move at a comfortable pace, and are not on the lookout for changing conditions. Entrepreneurs have to be like firewalkers, take a risk, move quickly one step at a time, searching for milestones on the way to success.

Improvise and work tirelessly while pushing boundaries. Great entrepreneurs, like pioneers, work hard, keep things simple, and focus on core needs. They don’t have a comfort zone or protocol to fall back on. They assume that new tools and structures will have to be built along the way. Progress on the learning curve is their satisfaction.

But even as an entrepreneur, you can fall back too quickly on prior experience, or settle into habits that are too comfortable. Here are some things we all need to do change perspectives and learn to learn all over again from time to time:

Transport yourself in time and place to your first professional role. Remember how you felt then, what you did, and how you approached work. Use this insight to reset your own thinking, and to provide great leadership guidance to other members of your team.

Multiply your expertise with additional experts. Avoid the temptation to jump in first, and consult other experts to bring new insights into the challenge at hand. Don’t give up until you have found new patterns to an area you thought you knew.

Reverse the learning role with new team members. By asking a junior colleague to mentor you, you will more likely hear new approaches or technologies and get new insights on your customer base or business challenges.

Expand your professional network to new groups. Actively look for people with views contrary to your own. As you change the stream of information and consider alternative views, your thinking will expand.

Take a step back and remap your terrain. Try to visualize your domain the way a newcomer would see it, without the filters you have already built in your mind. Map out the current players, rules of the game, cultural changes, and constituent alignments.

Swap jobs with a colleague for a day. Use the exchange to gain new business and customer insights, and to formulate the naïve questions that a newcomer might ask. The swap will be an exciting learning experience for both of you.

True entrepreneurs thrive on the experience of learning, maybe more than the experience of success. That’s why the best entrepreneurs I know can hardly wait for a chance to exit their current startup as it stabilizes, and start again down a less familiar but new learning path. Once you stop learning, you stop having fun, and you stop succeeding.

Sunday, March 11, 2018

As an entrepreneur, it’s never too early to set the culture you need for a thriving business, as well as thriving employees, customers, partners, and vendors. In fact, in my experience, cultures are very hard to change, so if you don’t get it right the first time, the road ahead will forever be difficult. “The Art of War” culture as an analogy for business doesn’t always work anymore.

He offers a set of seven principles and values for his ultimate win-win philosophy and harmonic balance among all stakeholders, as a roadmap for any company to develop a profitable, sustainable, and fun way of doing business. I recommend that every aspiring entrepreneur and serious business professional take each one of these to heart from day-one of their startup:

Talent is the whole ball game. When you surround yourself with hugely talented, passionate, dedicated, and genuinely kind people, you will succeed in whatever you do. Tindell’s mantra is that one great person is equal to three good people. Start with only the very best people, demand excellence, and train them to stay ahead of the pack.

Craft mutually beneficial relationships. This requires spending the extra time needed to really get to know your employees, vendors, and customers, and letting them get to know you. Know the issues they face, and search for ways to help them, make them happier, more productive, and more profitable. The result is more win-win than win-lose.

Reframe selling as an activity that improves customer’s lives. If you get to know your customers well enough, you can provide solutions that make selling and service the same thing. It’s a win-win deal that keeps customers coming back, helps your company, and incents customers to bring in their friends through word-of-mouth and social media.

Great communication is the best leadership. How can people trust their leaders if they’re not being fully informed about what’s at stake? The objective is to communicate everything to every person. It starts with daily ongoing communication between team members, and extends to the top with executive updates and informal listening sessions.

Simultaneously deliver the best selection, service, and price. Stick with what you know and do it better than anyone else. Keep is simple, and think solution rather than item-based, for the proper perspective. The best relationships with vendors give you price and selection leverage, and the best service relationships bring customers back.

Team members must act intuitively, based on training and motivation. Intuition is nothing more than the outcome of previous training and experience. More training on your solutions and customer needs means better intuition and anticipation of how to help customers. Happy and motivated employees won’t be afraid to use their intuition.

Build and maintain an air of excitement in your company. Faithfully following the first six principles will build that sense of excitement where everyone wants to be there and feels the sense of energy, customers and employees alike. You can’t force that feeling of warmth and caring, it has to be authentic and come from the hearts of talented people.

The great management guru Peter Drucker once said, “Culture eats strategy for breakfast.” Today company culture is more important than ever in driving strategy and value, not the other way around. A great culture in an entire business infrastructure of executives, employees, vendors, and customers working together to achieve a common goal of everyone thriving.

No leader can “create culture,” but they must create the environment where the desired culture can emerge and flourish. Leaders do this by driving values, values drive behavior, behavior drives culture, and culture drives performance. High performance makes new leaders. This is the self-reinforcing circle of excellence every business needs to succeed. Are you driving the right values in your business?

Saturday, March 10, 2018

As a startup advisor, I see many aspiring entrepreneurs whose primary motivation seems to be to work part time, or get rich quick, or avoid anyone else telling them what to do. Let me assure you, from personal experience, and from helping many successful as well as struggling entrepreneurs, that starting a business is hard work, and doesn’t come with any of the benefits mentioned.

Yet, for those with more realistic expectations and the right motivation, the entrepreneur lifestyle can be the dream life you envisioned. According to a study by the Wharton School of Business, in a survey of 11,000 MBA graduates over many years, those running their own businesses ranked themselves happier than all other professions, regardless of how much money they made.

So what are the right motivations, and how do you candidly assess your own? Indeed, there are many self-assessment tools available online, but I was more impressed with insights provided in a classic book “What Motivates Me: Put Your Passions to Work,” by Adrian Gostick and Chester Elton. These guys are workplace culture experts, and claim to have inputs from 850,000 people.

The authors offer portraits of some key individual personality types, such as achiever and thinker, and tie the relevant motivators for business success and happiness to these types. I have amplified these here from my own experiences to focus on the entrepreneurial subset of businesses:

You love doing your own thing and being in control of your destiny. As an achiever, you thrive on tight deadlines, ambitious goals, and leadership challenges. Even in chaotic startup environments, you normally finish required tasks on time and to high standards. Team members see you as high-energy, determined, and action-oriented.

You are driven by a cause or purpose to change the world. As a builder of new things and people development, you are not afraid to speak out on significant issues and world challenges. You cultivate loyal friendships, people growth, and thrive in strong team environments. You see success as making a difference in the world around you.

You are tuned into others’ emotions and want to help people. As a caregiver, you understand the problems of others, and are determined to provide solutions which will make their life better. You love to have fun at work, and believe that balancing work and family is critical. People see you as great for demanding customers and team bonding.

You are driven to compete and win in the marketplace. Being reward-driven, you are driven to win money, customers, applause, and the admiration of others. This determined nature can help you accomplish great things in new organizations. You are seen as a doer, but one who needs recognition and incentives to produce your best work.

You simply know there is a better way or solution to the problem. As a thinker, you love to learn, use your imagination, and enjoy the feel of adrenaline rush now and then. You get frustrated with bureaucracy, and won’t accept that things have always been done a certain way. Team members see you as the lifeblood of innovation in the organization.

In a critical extension to this thinking, the authors and I would outline another dimension to these personality types and motivators, by defining five motivation grade levels that also impact entrepreneurial motives, actions, and satisfaction:

Level A. Primary motivation is to make a difference in the world, with a secondary motivation of earning a living. These people define their roles in terms of their customers’ or employees’ or coworkers’ needs, not their own.

Level B. Primary motivator becomes making consistent return for stockholders. These are still good people with an intent to provide great products and services, but making a difference takes a back seat. This often happens when a Level A company goes public.

Level C. At this level, it’s not just money but the love of money that becomes the primary motivator. Entrepreneurs at this level will seek the minimum cost and quality to be more competitive. Advertising, pricing and support practices may show questionable integrity.

Level D. At this level, greed takes over as the primary motivator. Unethical acts are tolerated, and customers may be treated unfairly or harmed. We all know a corporate giant or two at this level who went out of business in the financial crisis a few years back.

Level F. At the lowest level are those involved in Internet scams, Ponzi schemes, or organized crime. Entrepreneurs motivated to work at this level harm not only themselves, their employees, and customers, but also society in general.

In the long-term, entrepreneurs in Level A are the happiest, successful, and most productive. Certainly we see some Level C and Level D entrepreneurs who appear to be prospering, but appearances can be deceiving and fleeting. Make sure your motivation to be an entrepreneur is more than a dream, and will stand the test of time for you and all the people around you.

Friday, March 9, 2018

In their passion to succeed, too many entrepreneurs treat friends and family investments as “low-hanging” fruit, only to find out later, after a stumble, that the pain of lost relationships is greater than the loss of their beloved startup. Other entrepreneurs never start their adventure, because they can’t face the prospect of even approaching friends and family for an investment kick-start.

The only way an entrepreneur can really dodge this issue is to totally fund the startup with personal funds (bootstrapping). Then you don’t have to worry about the fact that most angel investors and venture capitalists won’t take a bet on you if none of your friends and family have given you a vote of confidence with money.

This is a sensitive and critical area for new entrepreneurs, and it’s important to get it right the first time. Brian S. Cohen and John Kador, in their classic book “What Every Angel Investor Wants You to Know,” includes these great points of practical advice on this subject:

Manage expectations before the fact. Even if you passionately believe that your idea is a winner, it’s smart to remind friends of the historical facts with startups. More than 50% fail in the first two years, and even the “overnight successes” take six years on the average. In the interim, there is no market for the shares, and no dividends or interest.

Make sure the money is discretionary. If friends and family are still willing to take the risk because they believe in you and love you, you need to be convinced that they can afford to lose it all without major impact, and their emotion won’t generate unreasonable expectations over time. If you are not sure on this matter, then don’t take their money.

Be professional about it. Treat the transaction as you would expect to be treated by an angel investor or VC. That means writing down and signing the terms of the agreement, after making sure everyone understands them. Insist on paying market rates for commercial loans, since the IRS can instigate some nasty consequences on “gifts.”

Tie payments to your product or service revenue. Try to avoid obligations with fixed repayment schedules. With “cash flow” obligations, investors receive a percentage of your operating cash flow (if any) until they have been repaid in full, or have achieved a specified percentage return on their investment.

Loans are a safer option than equity. Offering debt is better than offering direct equity, especially in early stages when you have no valuation for setting equity percentages. Many use a convertible loan note that may be converted into equity upon the closing of the first formal angel or VC round of financing, with a more realistic valuation.

Pay the money back, with thanks, as quickly as you can. This money is real, so don’t assume it doesn’t have to be repaid. Some founders are too focused on quick repayment, and they compromise strategic decisions. That’s why it is better to use institutional investors and loans when you are able, with realistic time frame expectations.

Don’t forget a couple of additional potential negative realities. For entrepreneurs, friends and family money usually represents the smallest increment of funding, yet requires the most time to manage. Everyone wants to keep up and even have a say in your activities, and that can be a lot of conversations to manage.

A second harsh reality for entrepreneurs is the realization of how little power you have to protect the position of these early investors. New money from professional investors sees no value in old money, so the equity of early investors is “crammed down” and often lost in the scale-up surge. Later investors all think you have given away too much of the company too soon.

These realities are part of the reason that this first tier of very early investors are often referred to as “friends, family, and fools.” Most experienced entrepreneurs and investors can recount a horror story of families and friendships torn apart by money lost on someone else’s dream. In these cases both the entrepreneur and the friends are the fools. Don’t be one or create one.

Wednesday, March 7, 2018

Breakthrough innovation is the dream of every entrepreneur, but it’s still a scarce commodity. Selecting and nurturing people who are likely to help you in this regard is an even more elusive capability, and one that every angel investor, like myself, wishes he could get a lock on. In fact, every manager and business owner needs this skill just to survive with today’s pace of change.

We all wish we were the next Steve Jobs, or Elon Musk, or Thomas Edison. If we’re not, then at least we would like to recognize them when they come through the door, or better yet, create a few like them in our own organization. I wish I understood what makes some people so spectacularly innovative, producing triumph after triumph, while the rest of us merely get by.

I’ve seen a lot of speculation on this challenge over the years, but I was recently impressed with the insights in a new book, “Quirky,” by Melissa A. Schilling. From her position as professor at NYU Stern, and recognition as one of the world’s leading experts on innovation, she takes a deep dive into the lives and foibles of eight well-known innovators, including the ones mentioned.

One of her encouraging conclusions is that we all have potential in this regard, which can be brought out naturally by life circumstances and special circumstances, or nurtured by the people and culture around us. I’ll paraphrase her key recommendations for capitalizing on this potential, for use on yourself and members of your team:

Incent people to challenge norms and accepted constraints. Everyone wants to fit in, but most of us have felt a sense of being an outsider, which needs to be nurtured rather than crushed. Elon Musk, for example, had no experience or training as a rocket scientist when he came up with the idea of reusing rockets, and the innovative idea for SpaceX.

Give people time alone to ponder ideas without judgment. When you are looking for breakthroughs, you need time to think outside the box without fear of consequences. The payoff value of a person working alone on side projects, tapping into intrinsic motivation, has been the source of several of Google’s most famous products, including Gmail.

Reinforce people's belief in their ability to succeed. One of the most powerful ways to increase creativity, at both the individual and organizational level, is to encourage people to take risks by lowering the price of failure, and even celebrating bold-but-intelligent failures. Also, creating opportunities for early wins is extremely valuable for this process.

Inspire ambitions by setting grand goals and purpose. Driving business goals that have a social component that people can embrace as improving quality of life provides intrinsic motivation to increase creativity and effort in their activities. Steve Jobs was obsessed with revolutionizing personal expression, more than making a computer.

Tap into people’s natural interests and favorite activities. In business, this is called finding the flow. It requires both self-awareness on what you like to do, and a willingness on the part of your manager to personalize work assignments. Thomas Edison loved to solve problems, so he persevered, despite 10,000 filament material tests that didn’t work.

Increase focus on technological and intellectual resources. With today’s pervasive access to the Internet, with powerful search tools from Google, WolframAlpha, and many others, the Library of Congress is at everyone’s fingertips. They just need the inspiration, time, and training to capitalize on these tools, and the new devices that arrive every day.

Schilling and I do agree that you have to start with people who possess substantial intellect, so the conventional indicators of skill and accomplishments cannot be ignored. In addition, it’s important to find partners and team members with a high need for achievement, a passionate idealism, and faith in their ability to overcome obstacles, often seen as a level of quirkiness.

We are talking here about finding and nurturing people who can literally help you change the world, because that’s what breakthrough innovation is all about. If your business and personal goals don’t measure up to that standard today, maybe your first focus should be on rethinking your own objectives. The bar for staying competitive in business keeps going up.